Buy P.I. Industries; target of Rs 4350: Prabhudas Lilladher

Prabhudas Lilladher's research report on P.I. Industries

PI Industries (PI) 2QFY23 results were better than our as well as consensus estimates. Revenue/EBITDA/PAT grew by 31%/48%/46% YoY. Key highlights are: (a) CSM revenue grew 29% YoY to Rs12.8bn (volume/price growth of 25%/4% YoY); (b) domestic revenue grew 36% YoY to Rs4.9bn (volume/price growth of 31%/5% YoY); (c) Gross margins remained largely flat (+20bps YoY) to 45.2% YoY primarily led by better product mix aided by price hikes in the recent past; (d) CSM order book increased by USD400mn (+29% YoY and QoQ) to USD1.8bn; (h) launched 5/1 new products in domestic/exports market during 1HFY23; to launch 2/6 more in subsequent quarters. Citing robust demand momentum, PI continues to guide at +20% YoY growth in revenues with margins likely to improve from current levels primarily led by strong enquiries in the CSM business and new launches in the domestic segment. Factoring in robust 1HFY23 performance, we increase our EPS estimates by 9%/5% respectively for FY23/FY24E.

Outlook

We expect PI to report revenue/PAT CAGR of 21%/ 25% (FY11-22, 20%/26%) over FY22-25E. We introduce and roll forward over valuations to FY25E. Maintain BUY with revised TP of Rs4,350 (earlier Rs3,450) based on 40xFY25 EPS.